A flurry of early-year deal making has helped drive global mergers and acquisitions (M&A) activity to its highest level since before the financial crisis. And the M&A market still hasn't hit full stride.

Cash rich companies and greater confidence in the overall economy are two big reasons for the turnaround. But international, cross-border deals have offered another catalyst for the spectacular growth.

Indeed, global M&A activity in 2011 is expected to total more than $3 trillion this year, compared to $2.8 trillion in 2010.

Cross-border merger activity this year had risen 59% to $96.6 billion as of Feb. 10, according to Reuters, bolstered by a slew of mega-deals struck between energy companies and stock exchange operators.

"These are all multinational corporations that are looking around the globe to determine where their future growth is coming from," said Martha McGarry, a senior M&A partner at law firm Skadden, Arps, Slate, Meagher & Flom LLP. "The pipeline looks very healthy, and the growth in deal volume looks appreciably different than 2010."

The U.K-based Ensco last week announced it would combine with Houston's Pride to form the world's second-largest offshore drilling company. The deal carried a $7.3 billion price tag and it will make Ensco one of the most geographically diverse drillers with operations and drilling contracts spanning more than 25 different countries around the world.

That deal was shortly followed by another major cross-border deal. PetroChina has offered to pay $5.4 billion for a 50% stake in the Calgary-based EnCana Corp.

China's interest in natural gas projects has increased over the past year.

The deal with EnCana – Canada's largest natural gas producer – is the largest foreign gas deal by a Chinese company. And more large deals could certainly follow, as Chinese companies are searching the globe for reserves in a quest to triple gas use in the growing economy in the next decade.

"In the longer term, they have expressed a desire to be involved in the North American LNG market, but we have not discussed any details of that at this point," said Eresman. "We… think it makes a tremendous amount of sense for that market to be linked to the Asian market."

Big Boards – Bigger Deals

The energy market isn't the only sector in the throes of mass consolidation.

Deutsche Boerse unveiled the details of a $9.53 billion all-stock deal with NYSE just days after the LSE and TMX announced they'd merge into the world's second-largest exchange operator.

The deals are the latest in a consolidation cycle among exchange operators that has accelerated over the past decade. In 2010, Singapore Exchange Ltd. (PINK: SPXCY) agreed to an $8.3 billion takeover of Australia's ASX Ltd (PINK: ASXF) to create Asia's fourth-largest stock exchange and IntercontinentalExchange Inc. (NYSE: ICE) purchased the Britain-based Climate Exchange PLC (PINK: CXCHY) for $597 million.

Other bourses are likely to follow. In fact, CME Group Inc. (Nasdaq: CME) hasn't ruled out a possible counter offer for NYMEX.

Nasdaq OMX Group is reassessing its strategy following this week's action and it won't "sit on the sidelines" as the latest round of consolidation in the industry heats up, a source told CNBC.

Some analysts speculate that the Nasdaq could be the first U.S. stock exchange to tie-up with an Asian partner. However, any takeover of an Asian exchange would be fraught with complications. Tough regulatory regimes and complex ownership structures are just two hurdles a potential suitor would face.

"Beyond the fact that Asian exchanges are considered ‘national pride,' many are very behind the U.S. and the European exchanges in terms of governance and ownership structures to facilitate any significant cross-shareholding structures or full scale mergers," Lee Seo Young, a partner at Oliver Wyman's Asia Pacific financial services practice, told Reuters.

CBOE Holdings Inc. (Nasdaq: CBOE) may also generate interest. Its stock has jumped nearly 13% in the past week.

The Rumor Mill

Energy companies and bourses have made the biggest headlines lately, but there are plenty of places to look for takeover candidates. Some other big deals this year included Duke Energy Corp.'s (NYSE: DUK) $13.7 billion offer for Progress Energy Inc. (NYSE: PGN) and E.I. du Pont de Nemours & Co.'s (NYSE: DD) $6.3 billion deal with Danisco A/S (PINK: DNSOF) of Denmark.

TPG Capital LP and Leonard Green & Partners have already started in on their $3 billion purchase of J. Crew Group Inc. (NYSE: JCG), and Jo-Ann Stores Inc. (NYSE: JAS) agreed to be taken private by Leonard Green for about $1.6 billion less than two months ago.

Leonard Green is also said to be considering a bid for BJ's Wholesale Club Inc. (NYSE: BJ).

Another hot sector is technology – specifically social networking. Twitter Inc. recently took part in low-level talks with Google Inc. (Nasdaq: GOOG), which is also said to be considering a bid for video producer Next New Networks.

Finally, Morgan Stanley (NYSE: MS) is reportedly helping The St. Joe Co. (NYSE: JOE) explore its strategic options. St. Joe owns residential and commercial real estate in Florida and is looking to turn its business around following 2008's disastrous collapse.

Traditionally, the share price of the company being acquired benefits the most. That's because the company making the acquisition typically offers more than the market price for the takeover target.

Shares of the acquiring company can benefit too, particularly if it has a lot of cash on its books and is pursuing a complementary business. However, if the company is taking on debt to finance its acquisition or the target doesn't seem to bring much to the table, investors usually flee.

These situations aren't necessarily guarantees – just what usually happens.

Good evening, I'm new to the Private Equity market and would like to find out more about their MO and lay of their land. I work for a global investigative and intelligence firm which has performed investigative due diligence for acquirers so they know what they are buying.

What would you suggest for websites to follow, books and/or newspapers to read (I subscribe to the WSJ) that would clarify what PE firms do. Thank you.

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